What is Bitcoin, Cryptocurrency and How does it work?

Cryptocurrency is digital currency that operates independently of governments or a central bank. It is encrypted so as to regulate the generation of coins and verify transfers of funds.

You’ve likely heard of the most important ones: Bitcoin, Bitcoin Cash, and Ethereum. There are also Litecoin, Dash, Ripple, and IOTA, as well as others.

If you have been struggling to raise funds for your startup, trading in cryptocurrency could provide a solution for you. If you’d like to know more, keep reading.

How Does It Work?

Cryptocurrencies are based on what is called “blockchain” technology, Bitcoin’s major contribution to the field. Blockchain technology minimizes the risk of hacking. That’s because multiple servers continuously record every transaction that has ever been executed.

However, while some cryptocurrencies operate with integrity, others are little more than Ponzi schemes. If you choose to trade in cryptocurrency, therefore, do your homework first, and make sure you understand the risks.

Minimize Your Initial Risks by Starting Small

With most brokers these days, trading in Bitcoin is limited to large sums, excluding small traders from the market. One of the reasons for this is that the price of Bitcoin has shot up since its inception, hovering now around $4,000 for one coin. Compare this to its price at the end of 2013, when it traded for around $650 to $800, and you’ll understand the current excitement around it.

These days, however, some brokers are making it possible for almost anyone to start trading in Bitcoin. Keep in mind that with small sums you’re not likely to reap huge gains with your initial outings. However, with only a small amount invested, you’ll be able to cautiously gauge the market while you ramp up your activities toward greater profits.

Then, too, unlike with trading in foreign currencies, you can trade cryptocurrencies 24 hours a day, 7 days a week. This allows you to trade them whenever you have a spare moment.

Where Is the Market Going from Here?

As a matter of fact, Ronnie Moas of Standpoint Research is quoted as having said: “It would not shock me to see cryptocurrencies go to 4%” of global investment assets.

He continues, “Before anyone laughs at me for suggesting that something like that could happen—just look at what happened [in bitcoin] in the last five years. People who put in $10,000 made $1 million already. It happened already and I think it will happen one more time. We are in the 15th minute of a 90-minute soccer game—and it could go to overtime.”

Manage Your Position

Most brokers charge only for the spread. That is, they charge on the difference between the asking price and the bid price.

Some brokers even allow you to trade with no overnight fee. This means that you can keep your position with Bitcoin for however long you like. You can even speculate for long-term growth if you want to.

Be sure to set up your account so that you have negative balance protection, too. This will limit your risks to the amount you invest in the trade.

More About How to Control Your Risks

When you trade in cryptocurrencies, there is no expiry time. Therefore, it is your decision when you will get out of the trade. If you are not comfortable with monitoring your trade all the time, however, you can use the “position auto closing” function. This feature will close your trade whenever it reaches certain profit or loss that you specify.

For example, you can set your trade to close when it reaches a specified percentage of profit or loss. Or you can set it to close at a certain dollar amount, either profit or loss. You can mix and match these functions, as well. For instance, you could set to your trade to close when it reaches a profit of $60 or if the price of an asset drops below 30%.

Boon or Bane?

Depending on who’s talking, cryptocurrency is either the herald of a Utopian future or a financial bubble that’s sure to crash. But if you’re looking to achieve some quick returns to fund your startup and you’re not too risk-averse, trading in the cryptocurrency market may well be the answer to your prayers.